EMERGING ISSUES WITH INSURER RECOUPMENT OR REIMBURSEMENT FROM POLICYHOLDER

GGOLDBERG OLDBERG SSEGALLAEGALLA LLPLLPPhiladelphia New York Buffalo Rochester Syracuse Albany White Plains Long Island Princeton Hartford

EMERGING ISSUES WITH INSURER RECOUPMENT OR

REIMBURSEMENT FROM POLICYHOLDER

Daniel W. Gerber Esq.

Goldberg Segalla LLP

[email protected]

716.566.5425

www.goldbergsegalla.com

GGOLDBERG OLDBERG SSEGALLAEGALLA LLPLLP

NEW YORK NEW JERSEY PENNSYLVANIA CONNECTICUT



Understanding the Issue

• Assume 10,000 asbestos claims against manufacturer with exposure from 1950 until 1990

• In 1990, with few claims made, policies are found for 6 years from Alpha insurer and 3 years from Beta insurer

• A cost share is entered with insured paying 25% of defense and indemnity

• Insurers agree on and appoint defense counsel In 1995, thousand of claims pour in and two insurers agree to a cost share of 2/3 and 1/3

• In 1990 Alpha reserves its rights to recoup• In 1995, thousand of claims pour in and two insurers agree to

a cost share of 2/3 and 1/3



• In 1990 Alpha reserves its rights to recoup• In 1999 Beta reserves its rights to recoup• In 2001 Charlie insurer found with 3 years of coverage• Charlie’s policy requires reimbursement• Insured contributes to one claim in 2003 then refuses to

contribute• In 2004, Alpha unilaterally drops its defense payments to 25%

leaving an unpaid amount to defense counsel• Several settlements after 2003 and each carrier reserves• Insured is consulted and involved extensively in all claims and

has paid to have separate monitoring counsel



Reimbursement of Defense Costs

• Step on the Buss (Buss v. Superior Court)

• Insurer must:– Obtain a judgment of no coverage– Show defense costs were “solely” attributable to

uncovered portion/cause of action



Policy Language Implications

• “Implied-in-law” right (majority rule)– Did insurer place insured on notice and reserve its

rights?– Did insured object?

• Policy language requirement (minority rule)– Otherwise there is a “unilateral amendment to the

insurance contract”



Logistics of Repayment

• Duty to defend considerations

• Timing and content of notice to policyholder

• Timing of declaratory judgment action

• Unilateral action and bad faith considerations

• Indemnity considerations



Recouping Uncovered Settlement Funds

• Majority allows where:(1) Insurer issues timely

reservation

(2) Insurer notifies insured of intent prior to settlement; and

(3) Insured has meaningfully participated in defense and settlement

• Minority view– Policy language controls

– Frank’s Casing



Fraud

• No applicable exclusion of limitation

• Coverage would otherwise exist under policy

• Policyholder’s actions makes it ineligible for coverage



Unilateral Mistake

• Can an insurer seek restitution for an erroneous payment?– Yes

• Is detrimental reliance a consideration?– Yes



Policyholder’s Defenses Against Repayment

• Equitable estoppel – Can prejudice be shown?

• Waiver• Collateral estoppel • Lack of or timing of

notice• Lack of policy language



Key Considerations

• Look to the policy• Reserve early and reaffirm often• Considering making the defense

contingent upon acceptance of reimbursement terms

• Considering asking policyholder to consent to arbitration before there is a “dispute”

• Considering an early affirmative declaratory judgment action

• Hiring coverage counsel to monitor the defense

• Leveraging coverage with claimant

• Investigate, understand and hire experts early



Key Considerations (Ethical Implications)

• Place policyholder and defense counsel on notice of billing requirement

• Ask for detailed/separate billing

• Seek defense counsel’s testimony

• Look to defense counsel representations in correspondence and court



PRACTICAL TIP

Create a Claims Matrix• Name of lawsuit(s) (i.e. Parties) and when filed

• Jurisdiction

• Claims alleged

• Status (i.e. initial pleadings, motion to dismiss, discovery)

• Amount sought as damages (if possible)

• What coverage is potentially available

• Corresponding DJ Matrix (if necessary)



Practical Tip Control Your Own Destiny



Practical Tip Control Your Own Destiny

• Use “controlled aggression”- Demand regular status meetings- Do not settle for written status updates- Get all coverage opinions relative to all jurisdictions- Challenge defense counsel- Develop your own defense theories- Keep apprised of defense costs- Demand detailed invoices

• Recognize that sometime you want to fly under the radar

• Avoid being surprised!!!



Practical Tip

Two Heads Are Better Than One



Practical TipTwo Heads Are Better than One

• Organize meetings/calls with other insurers

• Make alliances

• Strength in numbers

• Be cognizant that other carriers on your tower may not have identical interests (i.e. don’t be bound by unilateral decisions)

• Negotiate Cost Share Agreements



Practical Tip Be Ready for Anything

GGOLDBERG OLDBERG SSEGALLAEGALLA LLPLLPPhiladelphia New York Buffalo Rochester Syracuse Albany White Plains Long Island Princeton Hartford

Thank you and Happy Holidays!

Daniel W. Gerber Esq.Goldberg Segalla LLP

[email protected]

www.goldbergsegalla.com

Documents

EMERGING ISSUES WITH INSURER RECOUPMENT OR REIMBURSEMENT FROM POLICYHOLDER